Buy China, advises Morgan Stanley Asia chairman Stephen Roach — but only after it tanks following a market correction Roach says is long overdue.
“I think right now the markets have run too fast too far, liquidity-driven and they have moved out of alignment with what I think is a very sluggish underlying recovery in the global economy,” Roach told CNBC.
Roach says the Chinese have focused too much on its investment growths and depended too much on export sales.
“The crisis is a wake-up call that the external demand from the West won’t be there for a long time,” Roach says, pushing China to find new sources of demand.
“Korea has shifted its major external market from America to China, as has Japan. . . so there’s a lot riding on the ability of the Chinese to stimulate this new source of internal demand that could benefit not just the Chinese, but the Koreans and the Singapore too,” Roach notes.
Overall, however, Roach remains bullish on China, seeing an upside in its services sector over the next 5 to 7 years.
The Organization for Economic Cooperation and Development doubled its growth forecast for the leading developed economies next year and predicted a further acceleration in 2011 as China powers a global recovery, Bloomberg reports.
The OECD also forecast that during 2011, the U.S. will grow 2.8 percent, the euro area 1.7 percent and Japan 2 percent, and the Chinese economy will expand 9.3 percent.
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